In a statement last week, Ogilvy said its records show that "administration of some accounting aspects of the contract" with the White House Office of National Drug Control Policy "did not meet rigorous record-keeping requirements imposed on federal contractors.
"That is not acceptable to us. Above all we value our integrity and have always approached work on behalf of our clients in a most ethical manner," the statement continued.
At a House Government Reform hearing last October, it was revealed that as much as a third of O&M's fees for buying anti-drug ads have been withheld since January 1999. At the time, the panel's chairman, U.S. Rep. John Mica, R., Fla., asked the General Accounting Office to review the billing. That audit is ongoing. (See related story, P. 6)
While some witnesses at the hearing questioned whether the billings were inflated, officials of the White House Office of National Drug Control Policy said the problems appear to reflect O&M's inexperience with government contracting procedures, rather than fraud. O&M didn't properly document some expenditures and billed, in other cases, for expenses common in private industry but not paid by the government, they said. The drug-office contract is Ogilvy's first with the government.
Barry McCaffrey, director of the anti-drug office, said last week he had didn't believe the ad agency engaged in fraud. "Ogilvy & Mather has been a joy to work with," he said.
"This is a fixed-fee contract," he added. "They don't make money by being more efficient or being wildly successful. They get a set amount of money. So I assume they are aggressively billing the government for every dime of work. I have no reason to believe there is any fraud. On the other hand, the GAO will go in and look at it and see what the problems are."
O&M said it initiated the review after questions were raised, and it "is cooperating fully with all government inquiries into its performance and billing."
"Ogilvy believes that it performed the contract with the ONDCP well beyond reasonable expectations and provided our client extremely valuable services," it said. O&M declined to comment beyond the statement.
The agency requested a meeting with the Justice Department, which was held Nov. 29. O&M said it retained PricewaterhouseCoopers to review its accounting procedures and implement a new system. It also hired consultant Robert Ravitz to supervise billing on the anti-drug account and to monitor government contracts.